I got the same kind of e-mail with an old password that I no longer use for anything important. They explained that they had compromising images that they would send to my contact list if I didn’t sent $500 worth of Bitcoin to the address they included.
Fact is, I knew they didn’t have incriminating pictures because I didn’t do what they accused me of. They said the Bitcoin address was unique to me, and they would know if I paid them. I checked the balance on the Bitcoin address and it already had $500 in it so I knew their claim was BS. They wouldn’t know it was me.
But they prey on people who might do this sort of thing, and then not have the technical savvy to determine it was crap. You were right. If they had a picture they would send it to increase the anxiety level and make it more likely you would pay.